A rocket operated by aerospace company SpaceX has exploded on the launch pad at Cape Canaveral where it was being test-fired ahead of a launch.
The force of the blast shook buildings several miles away.
SpaceX said "an anomaly" had occurred while the rocket was being loaded with fuel.
No one was injured, it said.
The rocket's payload, an Israeli-built communications satellite for Facebook due to launch on Saturday, was also destroyed, it added.
Facebook, in partnership with Eutelsat Communications, had been due to use the Amos-6 satellite to deliver broadband internet coverage for swathes of sub-Saharan Africa as part of its Internet.org initiative.
Facebook founder Mark Zuckerberg, who is currently visiting Africa, said he was "deeply disappointed" to hear that the satellite had been destroyed.
"We remain committed to our mission of connecting everyone, and we will keep working until everyone has the opportunities this satellite would have provided," he wrote on his Facebook account.
A leading Israeli space official said the loss of the Amos-6 satellite, valued at more than $US200 million (nearly $NZ275m) and owned by Spacecom, was a major blow to the industry.
"As far as the Israeli communications satellite industry is concerned, this is a very severe blow which could place the future of the industry in doubt if it is not dragged out of the mud," said the chairman of the Israel Space Agency, Isaac Ben-Israel.
Cape Canaveral Air Force Station said a "significant" explosion had happened just after 9.00am (2am NZ time) at Launch Complex 40, which is leased by SpaceX.
"The anomaly originated around the upper stage oxygen tanks and occurred during propellant loading of the vehicle," SpaceX said in a statement.
"As per standard operating procedure, all personnel were clear of the pad and no one was injured. We are continuing to review the data to identify the root cause."
SpaceX is aiming to create a new era of reusable rockets and affordable private space travel and has used its Falcon-9 rocket to take supplies to the International Space Station.
In December last year, the California-based company successfully landed a Falcon-9 back on Earth after a mission to launch orbiting satellites - a first in rocketry.
SpaceX is run out of Hawthorne near Los Angeles by Elon Musk, who made his fortune with internet companies.
As well as being the rocket company's CEO, he also heads up the Tesla electric car company.
- BBC